Market movers: Stocks that saw action on Thursday - and why

06 Aug 2020, 13:39 by David Leeder · The Globe and Mail

A roundup of some of the North American equities making moves in both directions today

On the rise

Canadian drugmaker Bausch Health Companies Inc. (BHC-T) jumped 4 per cent after it said on Thursday it would spin off its eye care unit, Bausch + Lomb, into a separate publicly listed company, seven years after acquiring it for nearly US$9-billion.

Bausch Health, previously known as Valeant Pharmaceuticals, has been seeking to get past a series of scandals and accounting issues under its previous management.

The company last week agreed to pay US$45-million, and three of its former top executives agreed to penalties, to settle charges of improper revenue recognition and misleading disclosures in U.S. regulatory filings.

Bausch Health said the spin-off would create two companies, one of which would consist of Bausch Health’s global vision care, surgical, consumer and ophthalmic businesses that brought in revenue of about US$3.7-billion in 2019.

Canadian Natural Resources Ltd. (CNQ-T) increased 2.9 per cent after it posted a smaller-than-expected quarterly loss on Thursday as improved natural gas prices and cost cuts helped cushion the blow from the COVID-19 pandemic on its operations.

Oil producers have cut spending plans in response to the novel coronavirus, and Canadian Natural, like most of its peers, reduced budget and cut drilling activity to deal with the challenging commodity price environment.

Canada’s biggest oil producer said average prices for its natural gas, a byproduct of crude production, rose 2.5 per cent to $2.03 per barrel in the reported quarter.

The company said North American natural gas operating costs averaged $1.11 per thousand cubic feet (Mcf) in the quarter, a decrease of 3 per cent from a year earlier, as it took steps to control expenses. Overall expenses fell 13.3 per cent to $3.48-billion.

Canadian Natural, which cut roughly 14 per cent of its production in May, also signaled support for the Alberta government’s mandatory output limits designed to help the industry in Canada’s main oil-producing province, home to the world’s third-largest reserves.

The company reported a 13.6-per-cent jump in second-quarter output after restoring most of the curtailed volumes in June, and said prices continue to improve due to reduced activity in the Western Canadian Sedimentary Basin, production declines through curtailments and shut-ins.

Average realized prices for crude and natural gas liquids, however, plunged over 70 per cent to $18.97 per barrel in the second quarter, before risk management.

On an adjusted basis, the company lost 65 cents per share in the second quarter ended June 30, while analysts expected a loss of 80 cents per share, according to Refinitiv IBES data.

Keyera Corp. (KEY-T) increased 7.9 per cent after reporting better-than-anticipated second-quarter results.

On Wednesday after the bell, the Calgary-based midstream energy company reported adjusted earnings before interest, taxes, depreciation and amortization of $183-million for the quarter, exceeding the $173-million consensus projection on the Street. All three of its segments - Gathering and Processing, Liquids Infrastructure and Marketing - topped estimates.

That led an analyst at Industrial Alliance Securities to raise his rating for Keyera shares.

Badger Daylighting Ltd. (BAD-T) was 12.9 per cent higher in the wake of the release of better-than-anticipated second-quarter results after the bell on Wednesday.

Elias Foscolos of Industrial Alliance Securities said: “Hydrovac revenue was in line with our expectations. Pricing remained stable and activity is continuing to trend positively based on commentary provided by the Company. Excluding CEWS benefits, the Company was able to post strong margins as expense reductions were able to offset one-time restructuring costs. BAD is executing well on its COVID-19 combative measures and is currently maintaining its long-term strategic targets. We expect a positive reaction in the markets today and likely upward target price revisions from analysts.”

Manulife Financial Corp. (MFC-T) was up 3.2 per cent after it comfortably beat analyst estimates for second-quarter core profit, which rose from a year earlier due in part to favorable policyholder experience and market impacts.

Underlying profit rose to $1.6-billion, or 78 cents a share, from $1.45-billion, or 72 cents, a year earlier, Canada’s biggest life insurer said in a statement. That compared with expectations of 62 cents.

On Thursday, Manulife CEO Roy Gori said focus on containing costs will be a key driver of for the next year and beyond.

Costs will be a “critical driver that gives us confidence in achieving that 10-per-cent to 12-per-cent core earnings growth,” Mr. Gori said on an analyst call. Manulife’s core general expenses in the quarter dropped 5 per cent from a year earlier, and it expects $1-billion in expense efficiencies by year-end.

BCE Inc. (BCE-T) was up 1.2 per cent after it saw its second-quarter profit plunge 64 per cent to $294-million due to higher expenses, including impairment charges related to some of its Bell Media TV and radio properties.

The earnings amounted to 26 cents per share, down from 85 cents per share a year ago and below the consensus analyst estimate of 64 cents per share from S&P Capital IQ.

On an adjusted basis, BCE earned 63 cents per share, down 32 per cent from a year ago and below the consensus analyst estimate of 69 cents per share.

- Alexandra Posadzki

Quebecor Inc. (QBR.B-T) rose 3 per cent in the wake of the premarket release of better-than-expected second-quarter results.

Revenue fell 5 per cent year-over-year to $1-billion, beating the consensus estimate of $989-million. Adjusted EBITDA of $476-million represented a 4.5-per-cent increase and also topped the Street ($437-million.).

Desjardins Securities analyst Maher Yaghi said: “QBR reported 2Q20 results which were above expectations in a quarter that entirely incorporated the impact of the pandemic. Both wireline and wireless subscriber numbers were stronger than expectations. The company did not provide an update on its outlook for the year, which is not a surprise as management generally only guides the Street on capex on the earnings call. We believe that similar to RCI, QBR is likely to ease off on its capex spending to protect cash flow generation for the year. It renewed its share buyback program, which allows the repurchase of 4.8 per cent of outstanding shares.

“The company cited several ways in which COVID-19 affected the business, including significant adverse impacts in retail outlet volume, cancellation of broadband data caps and wireless roaming charges, slowdown in client migrations to Helix, lower advertising revenue, reduced production activity and cancellation of shows and events. These did not represent a meaningful change from the previous quarter. We continue to believe QBR is well-positioned for the pandemic, given its relatively low exposure to enterprise, roaming and overage revenue. However, we anticipate media results could face continued pressure in the coming months.”

Stantec Inc. (STN-T) was up 1.8 per cent following the release of better-than-anticipated results after the bell on Wednesday.

The Edmonton-based company reported revenue and adjusted EBITDA of $951.1-million and $142.5-million, respectively, topping the consensus projections of $945.7-million and $139-million.

Calling it a “strong” showing and saying Stantec is “back on the old wagon,” National Bank Financial analyst Maxim Sytchev said: “It always takes a while for the market to settle on a new thesis (construction gone, playing catch-up, etc.) and it’s true that STN shares are not undiscovered; hence why they are up 18 per cent year-to-date vs. the TSX at down 4 per cent. We do, however, want to stress that the shares have been in a penalty box for five years prior to that and, in fact, in US$ terms the stock has not yet breached 2014 high. Fast-forward to 2021 and beyond and one has a cleaned-up entity, doing 2-4-per-cent organic growth, supplementing with M&A that can add another 3-4 per cent per annum and FCF yield in 4-6-per-cent range depending on the day. While it does not sound spectacular, when comparing to valuations of international peers, this is good enough for us (even at 11.5 times 2021 EV/EBITDA pre-quarter).”

WSP Global Inc. (WSP-T) was 1.6 per cent higher after restating 2020 guidance withdrawn as the COVID-19 pandemic set in earlier this year as it reports a “solid” financial performance in the second quarter.

The engineering firm says it had net earnings of $88.3-million or 83 cents per share in the three months ended June 30 on revenue of $2.2-billion.

That’s little changed from $89.2-million or 84 cents on revenue of $2.3-billion in the same period of last year, and closely matches analyst expectations, according to financial data firm Refinitiv.

The company says most of its employees are continuing to work remotely in most of the countries where it operates because of the pandemic.

In its updated guidance, it says it expects adjusted earnings of between $1-billion and $1.05-billion this year on net revenues of between $6.7-billion and $7.0-billion.

National Bank Financial’s Maxim Sytchev said: “WSP continues to execute while making the right adjustments to the headcount-driven business model in some geographies (Canada / the UK, for instance). Free cash flow was pretty spectacular even though we understand there is a timing component; still nice when timing is on your side. Government subsidies helped but even without them, the results would have been in line. The quarter once again demonstrates why investors gravitate towards the consulting business model while bestowing healthy valuations in the process (even though we view WSP’s 10.8 times EV/EBITDA on 2021 as unreasonably low vs. the likes of Tetra Tech and Sweco – both unrated – see comps below). With an all-time high backlog, we have visibility even though 1-5-per-cent organic revenue contraction is in the cards (in the ballpark of what we were looking for).

Bristol Myers Squibb Co. (BMY-N) raised its annual profit forecast on Thursday on hopes of a recovery in sales of its hospital-administered drugs, which had taken a hit as patients stayed away from doctors’ offices due to the COVID-19 pandemic.

The U.S. drugmaker said it was expecting demand for its drugs from new patients as well as for its products administered by doctors to recover in the third quarter and stabilize in the fourth quarter.

Pfizer and Merck & Co are also expecting medical visits by patients to return to normal by the fourth quarter.

Bristol now expects full-year adjusted profit of US$6.10 to US$6.25 per share, up from its prior forecast of US$6 to US$6.20 per share.

Shares of the company rose nearly 3 per cent after the company’s second-quarter adjusted profit of US$1.63 per share beat analysts’ average estimate by 15 US cents.

Bristol’s total revenue also rose 61.5 per cent to US$10.13-billion, above estimate of US$9.97-billion, according to IBES data from Refinitiv, mainly due to its US$74-billion buyout of Celgene.

Paramount Resources Ltd. (POU-T) rose 3.9 per cent with the premarket release of better-than-expected second-quarter cash flow and production results.

ATB Capital Markets analyst Patrick O’Rourke said: “Overall, we view the event as positive, with both production and cash flow ahead of our estimates and consensus. More importantly, wellhead results from the most recent pad at Karr appear strong on the liquids side, and operations at Wapiti improved dramatically in the quarter after facing third-party run time challenges in Q1/20. Capital discipline and well costs continue to improve, with the Company maintaining its $165-million capital budget while being able to accelerate some activities previously scheduled for 2021 into 2020, and H2/20 guidance provided for production of 65.0-70.0 mboe/d [thousand barrels of oil equivalent per day] that appears achievable in our view (current ATBe 66.1 mboe/d; cons. 66.2 mboe.”

Spin Master Corp. (TOY-T) jumped almost 17 per cent after saying it lost money in the second quarter as strong demand for outdoor play equipment, plushies and puzzles failed to offset declines in sales of Hatchimals and some Paw Patrol-branded merchandise.

The Toronto-based company lost US$14.9-million, or 15 US cents per share, in the three months ending June 30.

During the same period in 2019, the children’s entertainment company earned US$10.2-million or 10 US cents per share.

On an adjusted basis, the toymaker lost less money than expected during the quarter.

Spin Master posted an adjusted net loss of 9 US cents per share, compared to a loss of 17 US cents per share expected by analysts polled by Refinitiv.

Revenue was US$281-million for the quarter, down from US$321-million in the year-ago period.

Hilton Worldwide Holdings Inc. (HLT-N) posted a bigger-than-expected quarterly loss on Thursday, as the coronavirus pandemic hammered bookings and average room revenue throughout its largely reopened hotel networks.

Shares of the company rose 3.4 per cent after the company also reported an 81-per-cent plunge in RevPAR - a key performance measure for the hotel industry - for the second quarter.

The company’s results come amid rising coronavirus cases in the United States and extended disruptions to travel leading to tighter corporate travel budgets, an increasing pace of group cancellations and a dearth of new group bookings.

Hilton’s recovery has been faster in Asia-Pacific and the company has reopened all of its hotels in mainland China. However, its system-wide RevPar continues to be under pressure even as economies reopen gradually.

On an adjusted basis, Hilton posted a loss of 61 US cents per share. Its Revenue fell 77.3 per cent to US$564-million.

Analysts on average had estimated a loss of 31 US cents per share and revenue of US$848.7-million, according to Refinitiv IBES data.

On the decline

Restaurant Brands International Inc. (QSR-T) slid 4.2 per cent after it beat estimates for quarterly profit on Thursday as consumers queued up at Popeyes’ drive-thru lanes for its hugely popular chicken sandwiches.

The global health crisis has led to an increase in demand for comfort food, boosting sales of Popeyes’ fried chicken sandwiches - already a social media favorite after having stirred an internet war of words last year between the brand’s supporters and those who prefer rival Chick-fil-A.

Comparable sales at Cajun-inspired Popeyes rose nearly 25 per cent in the second quarter and come at a time when McDonald’s Corp , Starbucks Corp and Dunkin Brands have all seen sales drop.

However, total company revenue fell 25.1 per cent to US$1.05-billion, hurt by restaurant closures early in the quarter and a drop in demand for breakfast and coffee at the company’s Tim Hortons chain of restaurants.

Net income attributable to the company’s shareholders fell to US$163-million, or 35 US cents per share, in the second quarter ended June 30 from US$257-million, or 55 US cents per share, a year earlier.

On an adjusted basis, the company earned 33 US cents per share, beating Wall Street expectations of 31 US cents, according to IBES data from Refinitiv.

The COVID-19 pandemic has boosted Montreal’s Lightspeed POS Inc.‘s (LSPD-T) revenue and customer base, even as growth in the amount of money processed by its cloud-based point-of-sale platform slowed.

Its shares slid 1.8 per cent

The company said small- and medium-sized businesses shifted away from legacy point-of-sale systems to embrace its digitally integrated suite of products during the pandemic.

Though business slowed significantly in April, the company said as it reported its fiscal first-quarter 2021 earnings Thursday that it soon accelerated, pushing revenue up 51 per cent to US$36.2-million. But the company's loss for the quarter more than doubled from a year earlier, to US$20.1-million, as it boosted both general and research-and-development costs and paid out compensation related to a number of recent acquisitions.

The quarter ended June 30, 2020. The total customer locations it served grew to 77,000, up 34 per cent from a year earlier and 2 per cent from a quarter earlier. Though s higher-than-usual number of customers left Lightspeed during the quarter, the company said its pace of new-customer growth offset that.

- Josh O’Kane

Bombardier Inc. (BBD.B-T) finished flat after it reported a surprise second-quarter loss on Thursday, hurt by higher costs in its train business and a more than 40-per-cent drop in business jet deliveries due to the COVID-19 pandemic.

The plane and train maker recorded an additional charge of $435-million in its rail business in the quarter, mainly related to engineering, certification and retrofit costs for many late-stage projects in the UK and Germany.

This led to an adjusted loss of $319-million compared with a profit of $312-million a year earlier, the company said. Analysts on average were expecting Bombardier to report profit before interest, taxes, depreciation and amortization of $39.33-million.

The Montreal-based company is aiming to become a pure-play business jet maker and has agreed to sell its rail business to France’s Alstom SA, which won EU antitrust approval last week for the deal that is expected to close in 2021.

Bombardier said on Thursday the sale of its aerostructures business to U.S. aero parts maker Spirit AeroSystems is expected to close this fall.

Meanwhile, the company’s business jet deliveries fell about 43 per cent to 20 planes in the quarter, resulting in revenue declining about 37 per cent to $2.70-billion, but topping analysts’ expectation of $2.48-billion.

Bombardier’s business aircraft backlog was $12.9-billion as of June 2020, down from $14.4-billion as of 2019 end.

The company said its free cash outflow rose to about $1.04-billion in the quarter ended June 30, from $429-million a year earlier, but was lower than analysts’ expectation of $1.47-billion.

Canadian Tire Corp Ltd. (CTC-A-T) lost 6.3 per cent in the wake of posting a wider-than-expected quarterly loss on Thursday, as coronavirus-led closures at its Mark’s, Sport Chek and Helly Hensen stores hit its retail segment.

The automotive, home and sporting goods retailer closed all its 203 namesake stores in Ontario and focused heavily on its online business in the second quarter, as consumers stayed at home following government-imposed restrictions.

E-commerce, however, was a bright spot for the 98-year-old retailer during the quarter, rising 400 per cent and helping it offset some losses at its retail segment as more consumers shopped online. The segment posted a 15.2-per-cent decline in revenue.

Lower transaction fee revenue brought on by a decline in credit-card sales also hit the company’s financial services segment, whose income nearly halved.

Excluding one-time items, the company reported a loss of 25 cents per share, while analysts on average expected a loss of 10 cents, according to IBES data from Refinitiv.

Cronos Group Inc. (CRON-T) dropped almost 16 per cent after it reported a larger-than-anticipated second-quarter earnings loss before the bell.

“During the second quarter of 2020, the Company determined that there had been a material impact on the Company’s revenue growth rate in the U.S. segment as a result of the effects from COVID-19,” Toronto-based Cronos said.

Medical device maker Becton Dickinson and Co. (BDX-N) reported a lower quarterly revenue that missed estimates on Thursday, as delayed elective procedures during coronavirus-led lockdowns squeezed demand for some of its devices.

Shares of the New Jersey-based company fell 8.6 per cent.

With a recent resurgence in coronavirus cases, analysts expect medical device makers to remain under pressure as hospitals put off elective procedures in order to save capacity to treat COVID-19 patients.

In the third quarter, demand for Becton’s surgical and medical delivery devices took the biggest hit. Sales of surgical devices fell 36.4 per cent to 154 million, and medical delivery devices dropped 20.9 per cent to US$412-million.

“COVID impacted nearly all segments a tad worse than our models (suggested),” Evercore ISI analyst Vijay Kumar said, adding that the brokerage had underestimated the impact of COVID-19 headwinds on the company.

Becton said some of the gains from hospitals stockpiling inventories during March and April were reversed at the end of the quarter, as distributors started destocking following a decline in surgeries.

With files from staff and wires